Australian Tax Office to send warning letters to Airbnb users over unreported income

If you’re one of the hundreds of thousands of Aussies who rent out a property on Airbnb or other platforms, watch out.

Because the Australian Taxation Office might have you in its sights.

In the coming months, the ATO will carefully double check the details of Australians who earn an income from short-term rental platforms against the income declared on their tax returns.

If you’ve made the mistake of failing to report that income, you can expect a stern warning letter to come your way — or worse — as part of the tax office’s crackdown on the sharing economy.

It’s part of an effort to make sure every Australian is reporting their correct income — and paying their fair share.

An ATO spokeswoman told the letters would be rolled out shortly.

“Over the next 12 months, the ATO will issue letters to those taxpayers identified as using sharing economy accommodation platforms who haven’t declared the rental income they have received,” the spokeswoman said.

“The objective is to identify and educate those individuals to ensure they include the correct amount of rental income from these sources in their returns and pay the appropriate tax.

“This will ensure there is a level playing field for all people operating accommodation services in the community.”

Earlier this month, it was revealed Airbnb had emailed almost 200,000 Australian hosts to warn them their details would be shared with the ATO as part of the tax office’s sharing economy blitz.

According to the email: “Airbnb is currently under legal notice by the Australian Taxation Office (ATO) to share information concerning your hosting activity for the period from 1 January to 30 June 2019” as part of an ATO data-matching program “which requires sharing economy rental platforms to share information concerning their users, including, for example: name, address and telephone number”.

Those who receive the ATO letter after being caught out will have to amend their tax return to include all income, which can be done online through your myGov account, or through a registered tax agent.

But if an updated tax return is not received by the ATO by November 25, you could then be audited.

If your 2018 tax return is audited and found to include incorrect claims, you will need to pay back the ATO — and might also face a penalty.

The warning comes as the October 31 tax deadline looms, with Australians who have yet to file their latest tax return left with less than one week to get their paperwork in order.

The punishment for overdue tax returns increases depending on just how late you are, with fines increasing by $210 for every 28-day period you’re overdue, up to a maximum of $1050.

If you’re worried about the deadline, there is a loophole — taxpayers who lodge through a tax agent instead of going it alone can take advantage of concessional extended deadlines that allow their agent to lodge a form on their behalf up to May 15, 2020 without incurring any penalty.

However, you will need to register with your agent and ensure your name is on the books before October 31, even if the actual return is lodged at a later date.

According to H & R Block’s director of tax communications Mark Chapman, the Airbnb letter is designed to “politely” remind people to declare all their income.

“Basically, the ATO believes that a lot of people are renting out properties through online platforms like Airbnb, Stayz and that sort of thing and not declaring the income they’re earning by doing that,” Mr Chapman said.

The ATO is determined to make sure all Australians pay their fair share.

“They’re probably correct to think people are doing that, but a lot of people simply don’t understand the income they are getting is taxable.

“I don’t think people are deliberately doing the wrong thing, they just might not know they have to declare it and pay tax.”

Mr Chapman said the ATO had responded by approaching platforms like Airbnb to request the details of Aussies who used them to rent their properties.

It is then matching that data against people’s tax returns — and when a “mismatch” between their platform use and tax return is found, it triggers the letter to be sent.

“The reason why this has become an issue is because so many people are renting out their properties these days via short-term lets using these platforms — they’re getting more popular, and the ATO is increasingly worried about lost revenue,” he said.

Mr Chapman said income made through short-term rental platforms could be easily declared on your tax return, and reminded those who did use the platform that there were often associated deductions that could also be claimed.

“If you’re still not sure how to do all this, speak with a tax agent who can give you the guidance you need,” Mr Chapman advised.

The ATO is also believed to be particularly concerned about taxpayers claiming the full capital gains tax main residence exemption when part of their main residence has been rented out through Airbnb.

The law prevents a full CGT exemption where part of a main residence has been used to earn income.

Ride sharing apps like Uber and jobs sites such as Airtasker are also being looked into by the tax office.

For more information on the sharing economy and tax requirements, visit the ATO website.